Suppose you are the manager of Greg’s Tunes. The company needs a bank loan in order to purchase music equipment. In evaluating the loan request, the banker asks about the assets and liabilities of the business. In particular, the banker wants to know the amount of the business’s owner’s equity. Requirements: (1) Is the banker considered an internal or external user of financial information? (2) Which financial statement would provide the best information to answer the banker’s questions? (3) If the assets are qual to $5,000 and if the liabilities are $2,000, calculate the Owner’s Equity?
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ish so ok Visvesvaraya
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(1) Before lending money to Greg’s Groovy Tunes, a bank evaluates Greg’s Groovy Tunes ability to make the loan payments. This requires a report on Greg’s Groovy Tunes predicted income. If you try to borrow money for new music equipment, the bank will review accounting data to determine your ability to make the loan payments. Finally the banker considers owner’s equity. Financial accounting provides information for external decision makers, such as outside investors and lenders. These outsiders use the company’s financial statements.
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